The Multiple Facets of the IRS Scandal

What is commonly referred to as the IRS scandal consists of several distinct, although obviously related, elements. The scandal was brought to light by the revelation that the IRS, in evaluating nonprofits’ applications for 501(c)(3) or 501(c)(4) status, discriminated against Tea Party and other conservative groups. The IRS would routinely hold up such applications, sometimes for years, while often making irrelevant inquiries of the applicant, e.g., asking for the names of donors. At the same time, the IRS quickly and easily approved similar applications from liberal groups.

The IRS was in a position to do this in part because of the nature of the relevant tax laws. A 501(c)(4) organization, for example, can engage in political campaign activity, but that must not be the main focus of the organization. Application of these statutory standards inherently opens the door to discriminatory enforcement.

A second aspect of the IRS scandal relates to targeting conservatives in the audit process. Conservatives, especially high-profile donors to conservative causes, have long believed that they are likely to be singled out for harassment by the IRS. Anecdotally, it seems that there is considerable evidence to support this belief. Where the conservative is a wealthy businessman with a complicated tax return, it is hard to prove that an IRS audit was motivated by political malice. But what other explanation can there be for a case like that of Professor Anne Hendershott, who was targeted for an audit in 2010 after she wrote a series of articles, mostly in Catholic publications, that were critical of Obamacare. The IRS summoned Professor Hendershott to a meeting to discuss the “business expenses” associated with her writing. Hendershott reports that the IRS agent wanted to know “who was paying her” and barred her husband from attending the inquiry, even though the Hendershotts file joint returns. Hendershott says that she was so traumatized by the experience that she stopped writing about political topics, which presumably was the intended effect.

Other than motive, discriminatory audits have little or nothing to do with the agency’s review of 501(c) applications, which was the sole subject of yesterday’s Inspector General report.

A third aspect of the IRS scandal is illegal or improper leaking of confidential tax data. As we noted here, we already know that the IRS leaked pending applications for 501(c) status to a left-wing media group, that then publicized them. Yesterday another credible claim of an IRS leak emerged, when the National Organization for Marriage alleged that the IRS leaked confidential NOM data in order to injure Mitt Romney’s presidential campaign:

NOM, a pro-traditional marriage organization, claims the IRS leaked their 2008 confidential financial documents to the rival Human Rights Campaign. Those NOM documents were published on the Huffington Post on March 30, 2012. At that time, Joe Solmonese, a left-wing activist and Huffington Post contributor, was the president of the Human Rights Campaign (HRC). Solmonese was also a 2012 Obama campaign co-chairman.

Both the Huffington Post’s Sam Stein and HRC described the leak as coming from a “whistleblower.” The Huffington Post used the document to write a story questioning former Massachusetts Governor Mitt Romney’s support for traditional marriage. The document showed Romney donated $10,000 to NOM. …

In early April 2012, NOM published documents which it said showed this leaked confidential information did not come from a “whistleblower” but “came directly from the Internal Revenue Service and was provided to NOM’s political opponents, the Human Rights Campaign (HRC).” …

NOM announced Tuesday that it will sue the IRS for this alleged leak.

We also know that in 2010, Austin Goolsbee, who directed Obama’s Economic Recovery Advisory Board and later chaired his Council of Economic Advisers, smeared Koch Industries on the basis of IRS data which, if Goolsbee had accurately reported it, could only have been obtained illegally.

And there may be further aspects of the IRS scandal that have yet to emerge. In any event, if the scandal were confined to the 501(c) issue that was the subject of the original disclosures, it would be much easier for the Obama administration to get past it. That particular problem can be addressed and perhaps solved. But new revelations about discriminatory audits and leaks are likely to continue for some time, keeping the IRS scandal alive in the minds of voters.